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The Health and Safety at Work Act 2015 has been passed by Parliament and will come into effect on 4th April 2016 replacing the Health & Safety in Employment Act 1992.

Quick Summary

The aim of the Act is to encourage a pro-active and participative health and safety culture in our workforce. Everyone has a right to go home safely.

It increases the penalties for non-compliance and creates a new three tiered hierarchy of offences

It replaces the duties owed by employers and principals with a broader duty owed by “persons conducting a business or undertaking” (PCBU)

It imposes a new due diligence obligation on directors and officers

It imposes a new duty to take “reasonably practicable steps”

Changes do not directly alter how current insurance policies will respond to claims

Background

The economic and social costs of workplace injuries and diseases in New Zealand are estimated to be about $3.5 billion annually – around 10.2% of GDP. The Government wants to reduce New Zealand’s workplace injury and death toll by 25 % by 2020 and the aim of the Act is a positive one, to encourage a pro-active and participative health and safety culture in our workforce. Everyone has a right to go home safely.

The implementation of the new regime will see the onus placed on managers and company directors to pro-actively manage workplace health and safety. Together with stronger penalties and wide enforcement tools for non-compliance, it is hoped that this regime will see improvement to New Zealand’s poor health and safety record.

What do the changes mean?

1. Directors & Officers

Under the previous Act the liability of directors for breaches of health and safety was secondary to that of the company. This is no longer the case, and the directors and officers of an organisation are now charged with the duty to exercise due diligence to ensure that the PCBU complies with its duty to ensure the health and safety of others.

A director should manage the organisation’s health and safety risk with the same focus as the financial and reputational risk of the business.

Acquire and maintain current knowledge of health and safety matters, the company’s operations and the hazards and risks arising from those operations.

Verify that the company has sufficient resources available to manage health and safety risks, and that the company is utilising those resources.

Ensure the company complies with its health and safety duties.

The new legislation contains increased penalties for non-compliance and an increased focus on enforcement. Directors and officers will be personally liable if they fail to exercise due diligence.

2. Person Conducting a Business or Undertaking (PCBU)

Under the Act, a PCBU is any “person conducting a business or undertaking”, whether that person conducts a business or undertaking alone or with others and whether or not the business or undertaking is conducted for profit or gain. PCBUs include employers, principals, self-employed, partnerships, and people who manage or control a workplace.

Every PCBU has a responsibility to take “reasonably practicable” steps to ensure the health and safety of workers and other persons. This includes ensuring that the work environment does not pose risks to health and safety, that there are adequate facilities for workers’ welfare while at work, that all people receive appropriate information, protection and training to help protect them and that the health of workers and the conditions in the workplace are monitored to prevent injury.

The Act creates an enhanced primary obligation on PCBUs to take these steps to ensure the health and safety of workers. It places increased obligations to support worker participation, to consult with workers and if requested to train health and safety representatives. There are increased penalties for non-compliance and a much stronger focus on enforcement.

3. Workers

A worker is a person who carries out work for a PCBU, including as an employee, contractor, subcontractor, employee of a contractor or subcontractor, apprentice or trainee, or volunteer worker. Workers have their own duties to take reasonable care with their own health and safety and that of others.

The new Act increases the existing framework for worker participation and consultation with PCBUs and introduces a system for workers to request the election of health and safety representatives and to form work groups. As in all aspects of the new legislation both penalties for non-compliance and the focus on enforcement have increased.

Penalties and Enforcement

The Act introduces a modified penalty structure through a three tier approach for offences:

Category 1 – reckless conduct in respect of a health and safety duty; fines of up to $3m for a body corporate or $600,000 for an individual with terms of up to five years in jail,

Category 2 – failure to comply with a health and safety duty exposing an individual to risk of death or serious injury; fines of up to $1.5m for a body corporate and up to $300,000 for an individual,

Category 3 – failure to comply with a health and safety duty; fines of up to $500,000 for a body corporate and up to $100,000 for an individual.

The Act also creates a broader enforcement tool belt granting authorities increased powers to enter workplaces and ensure compliance and a continued ability to issue improvement notices, prohibition notices, new non-disturbance notices and suspension notices. Fines for non-compliance with these notices range from $50,000 to $100,000 for individuals and up to $500,000 for others.

Insurance Response

Generally, Management or Statutory Liability insurance policies will respond to a breach of almost all Acts of Parliament with a few specific exclusions that mainly relate to crime and traffic related Acts. Due to the constant change in legislation amendments to existing Acts or the introduction of new Acts are automatically included within the existing Management Liability insurance cover.

Therefore there should be no requirement to make any amendments to a Management or Statutory Liability insurance policy to ensure that after 4th April 2016 it will respond to claims brought for breaches of the Health and Safety at Work Act 2015.

One thing that the new Act has not changed is that insurance against fines imposed for a breach of the Act is invalid and of no effect. Therefore the actual fines remain uninsurable as they have been for some years.

However, insurance cover is available for the defence costs associated with a prosecution under the Act and also for any reparations that are awarded. The recently introduced Sentencing Amendment Act 2014 opens the door for the courts to order much higher awards of reparations.

Even though the fines themselves can not be recovered from insurance the legal costs of defending an action may well increase given that the new Act introduces much wider duties that have yet to be tested in court and because significantly more time and expense will be required to examine the validity of claims.

It is strongly recommended that in light of the upcoming changes that you review adequacy of cover under Management or Statutory Liability insurance policies to ensure that a sufficient limit of indemnity is available for the increased exposure.

Conclusion

The Health and Safety at Work Act 2015 imposes a much stricter environment on all organisations. It is vitally important that all parties affected take steps to ensure that they understand their obligations under the new legislation.

For directors of companies the new Act means that they need to take a much more active role in understanding the health and safety environment within their business. It is simply not a defence to say “I didn’t know.”

The Act also imposes additional duties on PCBUs and it is important that all employers, principals, self- employed, partnerships and people who manage or control a workplace take the time to understand their new obligations under the Act.

Statutory Liability Insurance policies will continue to provide cover for breaches of health and safety legislation as they have done in the past (as a reminder any fines are uninsurable).

However, all insureds should undertake a review of their Liability policies in light of the fact that there is now greater potential for awards of higher reparations.